Income Generation Series: Service-Based Business Models
Overview
Service-based business models are based on exchanging time and expertise for money. Whenever someone is providing labor in exchanging for money, they are providing a service. There are many service based opportunities such as graphic design, web design, SEO outsourcing, or consulting.
There are some distinct disadvantages to developing a service-based model. These models are very difficult to outsource, and even outsourcing can require a large management commitment. They are generally not very conducive to generating passive income, since they typically bill clients based on time expended. Additionally effort must be expended to build a client base, which takes time and money.
Given these disadvantages, a service-based business model does not integrate well into the business plan. Some opportunities may exist in outsourcing. Although, it would be critical to focus on consistent repeatable processes. Given that I am proposing to use third-world labor, the processes need to be specifically defined and simple to execute. Some opportunities may exist in developing cookie-cutter websites or link building programs. The risk would be that these activities could take my workforce away from focusing on what is really important.
Analysis
- Time: Very High. If not outsourced, you only make money on time spent working.
- Capital: Generally low. There would need to be some capital investment in branding and promotional material.
- Scaling: Very difficult to scale. If this were to be outsourced, scaling could only be achieved by hiring additional personnel. This would consequently increase overhead.
- Outsourcing: There is some opportunity for outsourcing, as long as the projects are simple and straight forward. It would be idea to develop a cookie-cutter system, in which the same tasks and objectives are outsourced.
- ROI: This is generally capped at the client bill rate. Difficult projects can charge a premium, but may be very difficult to properly outsource.
Recommendation
The service-based business model does not provide significant opportunities for my business plan. Opportunities may be considered to alleviate specific problems, such as idle workforce or the need to raise capital. However, these opportunities will be considered low priorities, and will only be utilized when necessary.
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